System and method for enhancing credit and debt collection

ABSTRACT

A system and method for enhancing assignment of debtor accounts to a plurality of collection parties is presented. The preferred embodiment is capable of optimizing the way by which individual performance entities are assigned to collect on actionable individual debtor accounts by a creditor. An analysis solution uses algorithms to analyze gathered data and to provide a score to each collection party based upon the traits of the individual collection parties, debtor accounts, creditor, externally acquired data, and constraints upon all of the parties involved. The system and method are also capable of enhancing an individual borrower&#39;s credit score depending on the risk involved with providing credit to that particular borrower based upon the collectability upon default. One embodiment of the invention would include a risk analysis and compliance assessment system for supply entities to evaluate potential performance entities or other entities.

CROSS-REFERENCE TO RELATED APPLICATIONS

This application is a continuation-in-part of and claims priority inU.S. patent application Ser. No. 14/145,536, filed Dec. 31, 2013, whichis a continuation-in-part of and claims priority in U.S. patentapplication Ser. No. 12/819,913, filed Jun. 21, 2010, now U.S. Pat. No.8,620,725, issued Dec. 31, 2013, which is a nonprovisional of and claimspriority in U.S. Provisional Patent Application No. 61/218,743, filedJun. 19, 2009, all of which are incorporated herein by reference.

BACKGROUND OF THE INVENTION

1. Field of the Invention

The present invention relates generally to a system and method forenhancing the process by which creditors provide credit and collectdebt, and in particular to a system and method for managing debtcollection parties and for enhancing the credit score of individualparties seeking credit based on the traits of the individual debt andthe debt collection parties involved with a creditor.

2. Description of the Related Art

Various systems and methodologies have previously been developed formanaging the debt collection process and the way in which companiesprovide credit to individuals. Credit scores, such as the Fair IsaacCorporation standard FICO score, Dunn and Bradstreet's DNB score, andthe Vantage Score, are the basis for which credit is supplied atpresent. An individual's ability to acquire credit depends upon thecredit score as reported by credit agencies such as Equifax, Experianand Trans Union. This credit score not only applies to an individual'sability to acquire credit, but companies, corporations, and otherentities as well.

Credit is central to all major financial transactions in today'seconomy. Most entities do not possess enough cash on hand for alltransactions, and so they rely on credit to make purchases of inventory,personal items, buildings, equipment, and other items that are a normalpart of daily life and business. The credit industry is essential to theeconomic world of today. Many external elements play a role in credit,such as the present economy, stock prices, and the willingness of banksto lend. Likewise, the responsibility of borrowers plays a large role inthe ability to receive credit. A borrower's prior conduct, financialstanding, and location, along with other traits, play a role in theacquisition of credit from a creditor.

Banks and credit card companies provide lending and credit services toindividual entities. When those individuals default on their payments,the lending companies seek the aid of collection parties to collect fromthese defaulting parties. Collection parties compete with one another toreceive these collection accounts from the lending companies. Debt canhave many traits, such as the amount, the location of the debtor, andwhether it is a primary, secondary, or tertiary debt, depending onwhether another company has attempted to collect the debt in the past.Each collection party has its strengths and weaknesses, and the lendingparties seek to provide the debts to the collection parties in a waythat would best ensure the debt is collected.

When an entity who has been provided credit defaults on their payments,collection parties are hired to seek out and collect on the debt. Oftenseveral collection parties will compete for the right to collect ondebts owed to the original credit provider. Certain techniques andpractices are currently used to best assign owed debts to individualcollection parties. One such method is known as the Champion Challengersystem. In this system, the “best performers” are assigned the majorityof debt collection assignments. The Champion Challenger system does notemploy a statistical analysis performed to determine which debtcollection party is assigned which piece of debt, and therefore has noway to determine if the assignee will perform optimally when collectingthe particular debts assigned. Other existing analysis systems attemptto look at how likely a piece of debt is to be collected depending onthe debtor's location, the amount of the debt, and the reason fordefault. This system fails to take into account the strengths andweaknesses of the collection parties fighting for the particular pieceof debt and match the competing debt collection parties to pieces ofcollectable debt according to those strengths and weaknesses. Stillother statistical models exist where collection parties and creditorscan score an individual debt on the likelihood of collection; howeverthese models fail to match the traits of the various parties involved ina way that will improve the ability to collect.

The invention presented herein seeks to focus on the traits of all ofthe parties involved in a credit lending and/or debt collectingtransaction. By comparing important traits of the debt itself, all ofthe debt collection parties seeking to collect on the debt, and thelending party itself, the present invention determines which collectionparty should be assigned which debt. Alternatively, the presentinvention can help to modify a borrower's credit score if it can bedetermined that the individual possesses certain traits that will make adefault easier or more difficult to collect. Using known statisticalalgorithms, plus algorithms developed and implemented specifically forthis invention, or unknown algorithms yet to be discovered, the presentinvention supplies credit and lending companies a more economic methodfor providing credit ratings and for collecting debt.

Heretofore there has not been available a transaction management systemand method with the advantages and features of the present invention.

SUMMARY OF THE INVENTION

In the practice of one aspect of the present invention, a system isprovided for managing the way creditors provide credit and collect debt.A system and method is presented wherein businesses can submit theirpast due accounts receivable and compare collection parties to selectthe best one for them, based on a variety of characteristics. Thepreferred embodiment of the present invention will take the chosentraits of a creditor, a number of debt collection parties, andindividual pieces of debt, and determine which collection party is bestsuited for collecting a particular piece of debt.

An alternative use of the present invention allows a creditor providingcredit to enhance or decrease a borrower's credit score based upon thecollectability of their debt. As an example, a borrower who isdetermined to be a low likelihood of collection recovery if defaultoccurs could have points reduced from their credit score, whereas aborrower who is determined to be of a high likelihood for collectionrecovery could have their credit score increased. By comparing thetraits of the collection parties available and of the particularborrower in question, the present invention will determine the riskinvolved with lending credit to a particular borrower, and in turn theability of the lender, or the lender's collection assignee, to collectthat debt using the collection parties available.

BRIEF DESCRIPTION OF THE DRAWINGS

The drawings constitute a part of this specification and includeexemplary embodiments of the present invention and illustrate variousobjects and features thereof.

FIG. 1 is a block diagram showing the flow of data into an embodiment ofthe present invention, with an output resulting.

FIG. 2 is a block diagram demonstrating the relationship between threeparties forming an embodiment of the present invention.

FIG. 3 is a block diagram demonstrating the flow of data during thepractice of an embodiment of the present invention.

FIG. 4.1 is a flowchart demonstrating a method of practicing the presentinvention.

FIG. 4.2 is a continuation of the flowchart of FIG. 4.1 demonstrating amethod of practicing the present invention.

FIG. 5 is a continuation of the flowchart of FIGS. 4.1 and 4.2demonstrating a method of practicing an alternative embodiment of thepresent invention.

FIG. 6 is a flowchart demonstrating a method of practicing anotheralternative embodiment of the present invention.

FIG. 7 is a flowchart diagramming a portion of the flowchart from FIG.6.

FIG. 8 is a flowchart diagramming a portion thereof.

FIG. 9 is a flowchart diagramming a portion thereof.

FIG. 10 is a flowchart diagramming a portion thereof.

FIG. 11 is a flowchart demonstrating a method of practicing yet anotheralternative embodiment of the present invention.

FIG. 12 is a flowchart demonstrating additional steps to practicing themethod thereof.

DETAILED DESCRIPTION OF THE INVENTION

As required, detailed embodiments and/or aspects of the presentinvention are disclosed herein; however, it is to be understood that thedisclosed embodiments/aspects are merely exemplary of the invention,which may be embodied in various forms. Therefore, specific structuraland functional details disclosed herein are not to be interpreted aslimiting, but merely as a basis for the claims and as a representativebasis for teaching one skilled in the art to variously employ thepresent invention in virtually any appropriately detailed structure.

Referring to the drawings in more detail, an input 2 enters into ananalysis solution 4, resulting in an output 20. In one embodiment of thepresent invention, the input 2 includes data relating to debts owed to asupply entity (client) 10, the traits of that entity, collected data ona number of performance entities (collection parties) 18, includingtheir individual traits, and data pertaining to a particular actionentity (account) 14. In a preferred embodiment, the action entity 14 isa particular piece of debt owed to the supply entity 10.

I. Debt Collection Enhancement System

FIG. 1 demonstrates how the input 2 data flows into the analysissolution 4 and results in an output 20. In the preferred embodiment, theinput 2 is a collection of data supplied by a supply entity 10. Thesupply entity 10 in the preferred embodiment refers to a client,typically a credit lending company, debt buyer, or any party seeking toimprove the efficiency of its debt collection practice. Other partiesinvolved include an action entity 14, typically a piece of debt or adebtor account, and a number of performance entities 18, such as debtcollection parties, law firms or individual collectors. The client 10provides particular input 2 into the analysis solution 4. Additionalinput 2 can be added from additional databases common to the analysissolution 4, from the other parties 14, 18, or from other knowndatabases.

The analysis solution 4 takes the input 2 from the client 10 andcombines it with additional inputs 2, including externals 6, supplyquantifiers 8, action quantifiers 12, and performance quantifiers 16.The quantifiers 8, 12, 16 include characteristic traits of the threeinteracting parties involved in the transaction, including the client10, the account debt 14, and a number of individual collection parties18. Each quantifier 8, 12, 16 may include a number of traits which willaffect how easily the debtor account 14 can be collected on. Externals6, which include all external influences on the output 20, areoptionally considered by the analysis solution 4. Once the input isconsidered according to the existing quantifiers 8, 12, 16, and theexternals 6, the analysis solution 4 produces an output 20. This output20 is used by the client 10 to allocate each debtor account 14 toindividual collection parties 18.

FIG. 2 demonstrates the interaction between the supply entity 10, theperformance entities 18, and the analysis solution 4. In a preferredembodiment, the supply entity (client) 10 includes a variety of computersystems 28 and databases 30 for containing and transmitting datarelating to debt collection. The computer systems 28 may include suchsystems as an accounting system, a server, and various other computersystems for use in the supply entity's 10 practice of its business. Thecomputer systems 28 link to relevant databases 30, including a databasecontaining information on all debtor accounts 14, a database containinginformation on all performance entities 18 used by the supply entity 10,and other databases. In particular, the supply entity 10 contains adatabase 30 containing account traits 32, 34, 36 associated with everydebt account 14 owed to the supply entity 10. All relevant data known tothe supply entity 10 is transferred to the analysis solution 4 so that acomplete output 20 will result.

The performance entities 18 refer to a number of collection parties 44,46, 48. Each collection party 44, 46, 48 is characterized by a number ofdifferent performance traits 50, 52, 54. These performance traits 50,52, 54 are either transmitted to the supply entity 10 and stored in arelevant database 30, or are transmitted directly to the analysissolution 4 from the performance entities 18.

The analysis solution 4 includes a number of databases 38 for containingall received data, including externals 6, account traits 32, 34, 36,performance traits 50, 52, 54, and all other quantifiers 8, 12, 16relevant to the particular account debts 14 owed to the supply entity 10and performance entities 18 used by the supply entity 10. The analysissolution further includes a number of computer systems with suitableprocessors 40 for analyzing received data and running the appropriatealgorithms 42 to obtain an output 20. The algorithms 42 employed by theanalysis solution 4 may be any suitable algorithm for calculatingstatistical information using the received data. Appropriate statisticalmodels include Naive Bayes or other forms of Bayesian statistics,regressive models, neural networks, decision tree, clustering, and anyother appropriate statistical model for analyzing received data.

The purposes of the algorithms 42 is to break down all received datarelevant to the performance entities 18, the action entities 14, thesupply entity 10, all externals 6, and any other relevant data, intotiers. As an example, the algorithms 42 will take the past performanceof each of the performance entities 18 and break them down into fivetiers. All other performance traits 50, 52, 54 will be broken down intothe same number of tiers, and each performance entity 18 will be sortedaccordingly. Each account trait 32, 34, 36 will then be analyzed andsorted in a similar manner. The analysis solution 4 will then assign theappropriate debtor accounts 14 to the performance entities 18 based onhow the sorted account traits 32, 34, 36 compare to the performancetraits 50, 52, 54 of the performance entities 18. The traits or inputdata pieces that are acquired may optionally be weighted, depending onthe supply entity's 10 preferences. For instance, the supply entity 10may wish to place more weight on the past performance of a performanceentity 18, rather than on its location.

In addition to individual pieces of data used for increasing efficiency,constraints exist in the system and may be considered in order tosatisfy the business strategy of the supply entity 10. These constraintsmay include the number of debt collection accounts 14 a particular debtcollection party 18 may collect on, the special nature of the debt assetin question, or any element that is not a distinct measureable trait,but that affects who may collect upon a debt. These considerations allowthe supply entity 10 to assign its debtor accounts 14 in the way mostmatching the supply entity's desired strategy.

FIG. 3 demonstrates the flow of the input 2 through the analysissolution 4, resulting in an output 20. As mentioned above, all partiessubmitting input 2 to the analysis solution 4 include specificquantifiers 8, 12, 16. These quantifiers are typically a number oftraits or elements defining each party with respect to one another. Thesupply entity 10 includes supply quantifiers 8, such as source data 72,stage 74 of the action entity 14, or other data 76 relevant to theanalysis solution 4. In the preferred embodiment, where the supplyentity 10 is a creditor and the action entity 14 is a debtor account,the source data 72 includes where the account has been sourced from andthe historical treatment of the account by the creditor. This may affectconstraints on a particular account if, for example, the action entity14 is a corporate account that is to be handled more carefully thanstandard pieces of debt. The stage 74 of the action entity 14 refers towork that has been performed on the account by the creditor. This mayinclude previous collection attempts of the debt and the performanceentities 18 previously used by the creditor to collect on the debt.Source 72 and stage 74 data refer particularly to elements of theaccount specific to the creditor and not to the account itself.

The action entity 14 possesses action quantifiers 12. In the preferredembodiment, where the action entity 14 is a debt to be collected, theaction quantifiers 12 may include debt amount 78, location 80 of thedebtor, past performance 82 of the debtor, collection attempt number 84,type of debt 86, and any other 88 traits relevant to the collection ofthe debt account. In the preferred embodiment, debt type 86 may includewhat type of credit was extended to the debtor party, and therefore whattype of debt is being handled. This is important if, for example, theaction entity 14 is a corporate account that is to be handled morecarefully than standard pieces of debt. The attempt number 84 of theaction entity 14 refers to whether a particular debt has had previousattempts of collection. A first-attempt collection, or primary stage,will be handled by different performance entities 18 than will asecondary or tertiary collection stage. All of the action quantifiers 12affect how each performance entity 18 will perform if assigned tocollect on the action entity 14, and are vital to efficiently assigningthe account to be collected to the collection party best suited tocollect that particular account.

The performance entity 18 possesses performance quantifiers 16. In thepreferred embodiment, where the performance entity 18 is a collectionparty, the performance quantifiers 16 may include the cost 60 ofservices, location 62 of the collection party, past performance 64 ofdebt collection, trends 66 according to different types of debtcollection, the size 68 of the collection party, and other 70 relevanttraits relevant to the collection of the debt account. The performance64 of debt collection may be further broken down depending on the types86 of debtor accounts previously collected on by the collection party.Trends 66 and past performance 64 may be broken down further into timeperiods of each, such as past month, past six months, past year, andlifetime of the collection party. Alternatively, other categorizationscould also be used such as new, updated, or validated balances,demographic information, or any other relevant or related data pointsselected or acquired by or on behalf of the supply entity or otherrelevant party.

These inputs 2 are fed into the analysis solution 4 along with externals6. Externals 6, as briefly explained above, include outside influenceson the analysis solution 4 that are not supplied by the supply entity10, action entities 14, or performance entities 18. Externals 6 areoptional input 2 traits that will affect the output 20. In the preferredembodiment where the supply entity 10 is a creditor, the action entities14 are debtor accounts, and the performance entities 18 are collectionagencies, externals 6 may include macroeconomic data 90, supply data 92,performance data 94, action data 96, and other relevant external sourcesof data 98.

Macroeconomic external data 90 may include such elements as thecountry's gross domestic product (GDP) 100, standard interest rates 102,stock market 104 prices and trends. External supply data 92 may includesupply entity 10 traits not included in the supply quantifiers 8 fordebt collection, such as ratios 106, sales data 108, and supply entitystock price 110. Similarly, external performance data 94 will includeperformance entity 18 traits not included in the performance quantifiers16 for debt collection, such as news reports 112 about each performanceentity 18, externally presented quality scores 114 for the entity, andthe entity's stock price 116. The action entities 14 also includeexternal action data 96, such as entity income 118, externally presentedquality scores 120, and other defaults 122 besides the current defaultthe creditor is attempting to collect on. Additionally, action entities14 may include more specific details and changes such as new or updatedaddresses, telephone numbers, and related contact information or otherinformation that may be received from external data sources.

As explained above, the inputs 2, including all quantifiers 8, 12, 16,and externals 6, are fed into the analysis solution 4 and processedaccording to the chosen algorithms 42. In the preferred embodiment, thecreditor is seeking to allocate its various debtor accounts to a numberof collection parties. By analyzing the input data 2, the analysissolution 4 will determine which collection parties have historically hadthe most success collecting specific types of debtor accounts. Insteadof randomly assigning a number of accounts to each collection partybased solely on each party's relative size and capability of activelycollecting on debtor accounts, the creditor will be able to assignspecific debtor accounts to collection parties who are best suited forcollecting those debts.

For example, under different methods for account allocation, aparticular collection party may be randomly assigned 50% of a creditor'sdebtor accounts. These accounts will be allocated to the collectionparty either randomly or based solely on the types of debts. Using thepresent invention, however, the same collection party will likely beassigned the same percentage of debtor accounts, but the creditor willinstead assign those accounts determined by the analysis solution 4 ashaving the best chance of being collected by that particular collectionparty.

The collection party that best satisfies the analysis solution for aparticular debtor account may not always be assigned that account forcollection. Constraints may come into play where a collection party doesnot have the resources to collect on additional debtor accounts, so thenext highest rated collection party may receive the account. Similarly,some traits may be weighted higher by the creditor than other traits,such as collection party location with respect to debtor accountlocation. This may also result in the account being assigned to acollection party that did not receive the highest correlation to thatdebtor account.

II. Method of Practicing Debt Collection Enhancement System

FIGS. 4.1 and 4.2 show a flowchart demonstrating the practice of amethod of the present invention. A series of steps are presented thatwill lead input data 2 through the analysis solution 4, resulting in anoutput 20. Some steps may be optional, but may lead to more refinedresults.

The method starts at 150. The first step in the practice of a preferredembodiment of the present invention involves pre-processing. Here, datais collected for use by the analysis solution 4. The supply entity sendsa file containing the action entities in its possession to the analysissolution at 152. This file may also include gathered action quantifier12 data that will be used by the analysis solution 4. The actionentities file is loaded into the analysis solution database at 154, andan optional backup archive of the original file is made at 156 andstored for later use. Next, the process must insert a record of receiptand storage of the file into a summary table at 158 and notify allinvolved parties of the “processing” status at 160.

The next phase is a scrub process, where collected data is checked todetermine if it is useable for the analysis solution 4. A check isperformed for each action entity 14 to determine whether each has beenprocessed at 162. A second check is performed to determine if there areacceptable quantifiers available for processing the input data at 164.If a response of “yes” is returned for a particular action entity oncheck 162 or a response of “no” is returned for a particular actionentity on check 164, an exception file or report is issued at 166.

In a preferred embodiment, a control group is created at 168. After apredetermined number of accounts are passed through from the scrubprocess phase, an account will be placed into a control group. Forexample, after four accounts have passed through the scrub process, thefifth account will be placed into a control group. This control group isused to determine whether the analysis solution is performing its joband optimizing the placement of accounts to collection parties. Theresults of the control group accounts can be compared with the analysissolution 4 output 20. If there is not a significant increase inefficiency shown by the output solution, there may be an error in theprocess, and so checks can be performed manually.

As stated above, externals 6 can be optionally considered whenintroducing input data 2 into the analysis solution 4. Externals areconsidered at 170, and if externals are not considered, the processcontinues to the next phase. If externals are considered, the externalprocess phase considers external supply data 92, external action data96, and external performance data 94. Other external data sources mayoptionally be included.

FIG. 4.2 shows the remainder of the flowchart diagram. Next, theanalysis solution 4 will generate results for each performance entityper action entity at 176. Essentially, each performance entity 18 isgiven a score or report for each action entity 14 as determined by theanalysis solution 4 from comparing the various traits and data inputs.Constraints or weights are optionally considered at 178. As brieflyexplained above, constraints are additional considerations that mayaffect which performance entity 18 is assigned which action entities 14.For example, there may be an employee size constraint on the performanceentity. Even if the performance entity is best suited to handle fiftyaction entities, it may be limited to only forty because of employeenumber constraints. Another example occurs when the action entity is acorporate account or is otherwise handled with special procedures. Insuch cases, certain performance entities may have been trained to dealwith these special action entities and will receive priority when beingassigned such action entities.

In addition to and/or instead of constraining data, the input data maymerely be weighted at 178. As briefly explained above, weighing the dataallows the supply entity 10 to customize the dataset according to whichperformance quantifiers 16, action quantifiers 12, or supply quantifiers8 it wants to have the most impact. If constraints or weights areconsidered at 178, the solution will consider supply constraints at 180,action constraints at 182, and performance constraints at 184. Otherwisethese constraints will be skipped, and the method proceeds to theallocation process phase.

During the allocation process phase, the analysis solution 4 willgenerate allocations 186, wherein each action entity 14 will be assignedto a performance entity 18 that has been determined to have the bestchances for collecting on the action entity. These results are thencopied to tables and archived at 188 for backup purposes. The resultsare then placed into a confirmation table at 190, and a confirmationcheck is performed at 192. This confirmation check may be automaticallyperformed by software or it may be manually performed by the supplyentity 10. If confirmation is not received at 192, the process returnsto the generate allocations step at 194 considering the changesrequested during the confirmation check.

If confirmation is granted at 192, the output is exported to a file thatis saved and sent to the supply entity at 196. Along with the files,detailed and summary reports are sent to the supply entity at 198. Thesereports contain the data that was used to allocate the action entitiesto the performance entities, detailed descriptions on any allocationsthat occurred because of constraints, and any other importantinformation that the supply entity may want to consider when reviewingthe allocation list. The process then ends at 200.

III. Alternative Embodiment Credit Enhancement

The preferred embodiment discussed above describes a system and methodfor enhancing debt collection practices by optimizing the allocation ofdebtor accounts to collection parties using an analysis solution. Analternative use of the same or similar information can result inenhancing or decreasing an individual's credit score. This is done bydetermining how easy or difficult it would be for a collection partyknown to the analysis solution database and/or supply entity to collecton an individual's debt if they were to default. If the individual isshown to correlate with a number of collection parties, that individualmay receive a higher credit score due to a lower risk of collection upondefault. The opposite is true if it is shown that the individual wouldbe difficult to collect against if default were to occur.

FIG. 5 expands upon the flowchart shown in FIGS. 4.1 and 4.2, furtherdemonstrating the practice of a method of this alternative embodiment.However, instead of allocating accounts to collection parties, thepractice of a method of the alternative embodiment includes generatingan action modifier value at 204. These results are copied to tables andarchived at 206 and placed into confirmation tables at 208 before aconfirmation check at 210. As before, confirmation can be performed bythe software automatically or manually by the supply entity. Ifconfirmation is not granted at 210, the process returns to generate theaction modifiers again based on the requested changes made at 212.

Upon final confirmation, the files are exported, saved, and sent to thesupply entity at 214, followed by the sending of detailed and summaryreports at 216. This data helps a supply entity, typically a creditor,determine what credit score to assign to an individual seeking credit.The process ends at 218.

While the present invention would typically be used for the embodimentsas described above, the previous examples are not intended to limit thepresent invention in any way. It should be noted that the presentinvention could be used as a system or method for establishing a newcredit score. Based on the quantifiers, externals, and other datasources acquired by the present invention, a new credit score can beprovided that would be based on more information than existing creditscores.

IV. Detailed Breakdown of Debt Collection Enhancement System 302

FIGS. 6-10 break down the debt collection enhancement system 302 intomore detailed parts resulting in dynamic placement of debtor accounts tocollecting parties (e.g., account type classifier) and/or generation ofa payment method indicator or payment score. FIG. 6 shows how a datasource 304 creates an input for the system as described for the basicsystem above. The data source 304 can provide historical data 306 for anexisting account, or new accounts 308, including relevant known data,which would be entered into the system 302.

All incoming data is placed into a data treatment module 310. In thismodule, data is treated automatically by the computer overseeing theentire system. The best set of descriptors which apply to each elementof the dataset are selected, and a classifier or multiple classifiersare applied to the data, including at least an account type classifier316. These classifiers are the key to differentiating each account intoseparate payment types, such as: (1) Paid in Full (PIF), wherein thedebtor agrees to pay, in a single installment, the full balance of theaccount; (2) Settled in Full (SIF), wherein the debtor agrees to pay thefull balance in the account in a predefined number of installments; (3)Payment Plan (PPA), wherein a payment plan has been established for thedebtor account; and (4) Partial Payment (PP), wherein the debtor simplymakes a partial payment and agrees to make another payment toward thenew balance, after a certain number of days, but no agreement is madeupon specific values. Other payment schedules, types, or categorizationsof the accounts would be equally suitable here, if selected by thesupply entity or other relevant party. Other examples include balloonpayments, short term payments, payment amounts (e.g., tiered), paymentintervals, a debtor's ability to pay, etc. If an account cannot beclassified in any of these four classifications, it will be placed intoa “conventional accounts bucket” and be treated to a second level oftreatment. The payment method indicator becomes an account trait 32, 34,36, as shown in FIG. 2. Other factors could also become account traits,depending on what data values or data elements are supplied fromexternal sources. Almost anything could qualify if it is relevant togenerating feedback to the analysis solution 4.

A step of automatic data cleansing and preparation 312 requiresverifying the integrity of the data from the data source 304 andremoving or otherwise resolving inconsistencies, missing values,outliers, and other anomalies. This step is key because the classifiersare sensitive to “noise.” It is important to create and use “clean”data, stored in a specific format to increase the accuracy of resultsusing the data.

Once data has been sufficiently “cleaned” through the data cleansing andpreparation step 312, a second step may take place. This step of datapreparation determines when certain descriptors or variables need to betransformed such that all of the descriptors are represented in the sameway. For example, if one variable is used to represent the individual'slinear age in years, and the individual's location through an area code,the result would be: one numeric variable (Age in Years) and onecategorical variable (Area Code). Although area code is representednumerically, those numbers don't have an algebraic meaningTransformation can take place by assigning an area code with a “locationcode” that corresponds with a geographic location that can be handledalgebraically, or conversely the individual's age in years can beassigned a categorical value depending on a predetermined age range.These are merely examples of how this data cleaning and preparation stepmay take place.

Once data is cleansed and prepared at 312, it may either directly beplaced into account type classifiers at step 316, or the data mayfurther go through a process of features selection at 314. The featuresselection step 314 is the process of evaluating the existing variablesin a data set and selecting the ones that can best describe each one ofexisting classes one is trying to identify. During the featuresselection process step 314, the system 302 analyzes each individualvariable and assesses its discrimination power through statisticalanalysis (such as correlation analysis), and then generates newvariables through linear combinations of the existing descriptors in anattempt to increase the discrimination power. The features selectionstep 314 is also an efficient way of reducing the dimensionality of thedata, by keeping only the most valuable descriptors and, at the sametime, increasing the system's efficiency. There are different ways ofperforming features selection as described in more detail below.

A classifier for the processed data may be generated at the account typeclassifier step 316, which may take place after the features selectionstep 314 or simply after the data cleansing and preparation step 312.Generating a classifier able to accurately categorize incoming accountsinto one of the four existing payment types is the ultimate goal of thefeatures selection step 314. This may also lead to repeatedlyclassifying these new accounts through the account type classifier step316 so they can be more precisely sent to the agency that brings higherchances of collecting the most from that specific account. The accounttype classifier is a general instance of supervised learning and can bedesigned and implemented using different types of statisticalclassification algorithms such as neural networks, decision tress,Bayesian classifiers, etc. The choice of what algorithm should be useddepends mostly on the quality of the available data.

Backing up slightly, FIG. 7 breaks down the historical data 306 that maybe introduced into the system 302 via the data source 304. Thehistorical data is fed through a data quality assessment step 318. Thedata quality assessment will generate a list of usable variables whichwill be analyzed by individual variables analysis performed at 322,after which the data is fed directly into a data reduction step 324.Alternatively, the historical data may be fed directly into the datareduction step 324. This combination verifies inconsistencies andmissing values as well as the existence of outliers. Based on the resultof this analysis, some records may be excluded from the training processand/or some variables will be discarded due to their low discriminationpower. All data fed through the quality assessment step 318 isdocumented at 320 and saved for other purposes or for quality and/orfact checking purposes at a later time.

Next, a data discretization and normalization step 326 occurs. This iswhere variables are placed all on the same “standard” format, such thatit can be compared in an “apples to apples” comparison. As discussedpreviously, this will simplify the analysis process by transforming allalgebraic identifiers into categorical identifiers or vice versa. Thisresults in the account type classifier 316 as discussed above. The finalproduct of this part of the process is a classifier able to analyze anaccount based on its attributes and determine the chances of thataccount being one of the four existing account types. In a situationwhere the probabilities for all classes are very low, the account issent to a “follow-up” process 338 discussed in detail below. Theultimate result is to generate a payment type classifier 328 to apply toeach account.

Before proceeding through the main flow chart as shown on FIG. 6, thefeature selection 314 step is broken down into more detail in FIG. 8. Asindicated above, the features selection step 314 is the process by whichthe computer system chooses a set of variables or descriptors that best“describe” or otherwise relate to each one of the existing classes in agenerated data set (e.g., forward sequential selection or backwardsequential selection). For the purposes of further explanation, FIG. 8diagrams out how the original data set of original descriptors 330 ismodified by the features selection process at 332 and documented at 334to result in the features selection step 314 which is applied to theincoming data elements.

FIG. 9 expands upon the account type classifier step 316. New accounts308 are identified with a payment type classifier 328 as discussedpreviously, and then are transformed into classified new accounts 336.This is the preferred way of classifying accounts and/or other datainput into the system 302. However, as discussed previously, someaccounts may not be easily placed into the account classificationpresented here, and must go into a “follow-up” module 338. Data oraccounts that were unable to be classified to a payment type are placedinto a “follow-up” module 338 according to statistical properties thatsignificantly improve the placement process, and are then fed into aclustering process 340 as shown in FIG. 6 and in more detail in FIG. 10.

The “follow-up” module 338 is shown in FIG. 6, generally including theclustering process step 340 and the clustering classification processstep 342. FIG. 10 goes into further detail regarding this clusteringprocess step 340. Unclassified accounts 344 must be separated into“clusters” or identifier groups which help to categorize/classify thepreviously unclassifiable accounts that do not fit into one of thepayment types. The system 302 first determines and generates anappropriate number of clusters at step 346. The number of clustersshould be minimized as much as possible. Data is then clustered at 348into one of these clusters/categories based upon a selected piece ofdata (or multiple data samples) as determined by the computer system.Internal classifiers are built at 350 to bring the clustered data setswith the previously classified accounts. When classifying accounts basedon payment types it is possible to assess the eligibility of an accountto be classified as being this or that payment type. This is donethrough a scoring system based on a number of elements, notably thehistorical performance of a given agency, its current ability to perform(collect) as well as specific characteristics of the account itself.This process will use all this information to not only try to classifythe account in one of the possible payment types but also a paymentscore, which informs a degree of certainty with which that decision wasmade.

The clustering process 340 is composed of two main steps: first, thesystem will try to mimic the same type of processing used to implementthe basic payment type classification, by clustering the accounts in acertain number of clusters that are concise and far apart from eachother. The desirable number of clusters is unknown beforehand and isdependent on the data set. Once the clusters are formed, the second stepof the process builds a classifier for each agency inside each cluster.The result may end up with n clusters. The client may have m agencies.Therefore, the result will end up with n×m classifiers. Although thenumber of accounts surpasses the number of agencies by a large amount,it makes sense to send different accounts to the same agency for one ofthe reasons previously determined via the algorithm.

Clustering, or unsupervised learning, is the process of groupingtogether elements that present similarities among them according to thevariables they are represented by. As an example, customers, andconsequently their buying habits, can be seen through differentperspectives such as the types of products they buy, the time of yearthey spend more money on certain types of products, states wherecustomers spend more on a specific type of product, etc. In the presentcase, the system 302 uses the data categories (e.g., fields) customersselect when applying for credit. These categories may include age,address, or the name of the store they are buying from, and thesevariables can be used to group those accounts in a certain number ofclusters. Determining the right number of clusters is the first step andone that can be accomplished throughout a different number of techniquesas briefly discussed above. One of them is to use hierarchicalclustering and a dendrogram that can show the distance between differentgroups of data points. Once this task is done, the next step is to usethis number of clusters as a parameter to some more robust clusteringalgorithm, such as the fuzzy based methods, density based methods, etc.Data used for clustering purposes, including the categories above, isfed directly from the data cleansing and preparation step 312 via line313. Note that this line indicates the flow of data for use in theclustering process only, and does not reference a flow step. All datamust pass through the data cleansing and preparation step 312 to eitherthe features selection step 314 or the account type classifier step 316.

The clustering classification process step 342 is where individualclassifiers for each agency are generated inside of each individualcluster. These classifiers will be looking at the historical performanceof each one of the running agencies in order to establish a link betweenthat performance and the instances of each one of the variablesrepresenting the data points (e.g., accounts). For example, the systemcan verify that cluster k has most of its accounts with balances between$200 and $500 from apparel stores. The system will then search amongstthe existing known agencies, and determine how well each of them hashistorically performed in collecting from that specific segment. Thesenumbers are all calculated behind the scenes by the operatingclassifiers and clustering algorithms. Examples of possible classifiersthat can be used during this phase of the process include neuralnetworks, linear, non-linear and logistic regression, among others. Itshould be noted that data clustering is not the only method of analyzingand sorting data. For example, simple weighting scores could be used toarrive to assignment conclusions, as could neural networking or otherdata handling methods.

Once the data has been classified and/or clustered, the system willdetermine whether a preferred performance entity exists to handle thedata as organized. This occurs at an assignment decision step 352, whichis optional as all data could flow in one direction or another. It ispossible that the database contains no agencies which would berecommended to collect upon the accounts set that has been generated. Insuch a case, no agency would be assigned the account and the accountdata would go back into the follow-up module for re-clustering. If anagency is selected, the classified or clustered data set is placed intothe allocation queue 353 and assigned as a “final data set” at 354 andis sent to the performance entity or performance entities at 356 forcollecting. It should be noted here that data on all agencies iscollected and kept in real-time and is fed back into the database andinto the follow-up process. An agency's rank or classification forcollecting a particular kind of debt can rise or fall over time. Ifclustering is not necessary at the assignment decision step 352, thedata set simply is placed into the allocation queue 353 and sent outinto the final data set 354.

The allocation queue 353 is fed allocation thresholds 303 which arebased upon the data source 304, including all relevant attributes ofthat data source. These allocation thresholds 303 perform the functionof “thresholding” as described in more detail below and in FIGS. 11-12.This is a completely separate function and step performed by the systemafter scoring takes place. Thresholding essentially balances theallocation of resources amongst collection agencies, individual agents,or other participants within the process.

FIG. 6 could alternatively be shown with an alternative flow of datathrough the debt collection enhancement system 302. In such analternative arrangement, the line 313 from FIG. 6 is removed. Thedecision box for assignment decision 352 is also removed. Although thisarrangement could have occurred naturally through the flowchartdiagramed in FIG. 6, which would clarify that all data will filterthrough the clustering process 340 and clustering classification process342 of the follow up process 338 prior to allocation 353. However, thisalternative arrangement is equally possible with the arrangement asshown in FIG. 6; the alternative arrangement would merely clarify thispoint.

V. Risk Assessment and Compliance Management System 402

Historically, risk management has relied on self-governance and manualassessment of compliance standards adherence by the operating entities.Poorly managed self-governance can result in a high degree of exposureand risk of compliance violation which can result in penalties, censureand revocation of operations. The toolsets available for monitoringcompliance are not robust and neither proactively initiate remedy nortake action to reduce or eliminate the exposure to risk associated withnon-intervention, the consequence of which can be severe both in termsof potential penalties and loss of business as well as fines andoperational censure.

The present invention can also be used to provide a means to manage therisk associated with compliance in debt collections. By combiningtracking with measurement, a risk score is generated which is then usedto initiate automated actions and notifications that proactivelyprotects the debt owner (e.g., supply entity 10), and/or manager (e.g.,performance entity 18), from compliance violations. The risk score caneither result in complete termination of a performance entity from thedatabase or the creation and application of a compliance exception whichlimits a performance entity to accounts of which the performance entityhas the required compliance status to collect upon. These mechanisms areactivated as an integral part of the workflow process, submitted viainput 2, and can be introduced either as a software solution thatintegrates with the operational environment or via a hardware solutionthat incorporates the essential rules and algorithms and is available asan accessible device within the operating network of the utilizingentity, either supply entity 10 or performance entity 18.

While this method is similar to, and utilizes many of, the samemeasurements and information that are manually administered by others,the unique nature of this solution is that it produces an assessmentscore representing the health of a particular entity that is acting onaccounts. This score is then used to automatically drive specificdecisions and actions that affect the ability of the entity to accessand process accounts, thus aiding in maintaining a high degree ofcompliant operations. This may be used as a pre-process validation forperformance entities 18 to be allowed to receive accounts or to continueto work prior placed accounts.

FIGS. 11 and 12 diagram a method of applying the present invention to arisk assessment and compliance management system 402. This system wouldtypically be employed by financial institutions when assigning debtcollection duties to third party collection agencies, but could be usedin a number of other situations as well to automate the assigning ofduties to entities based upon legal compliance and a risk assessmentstandpoint.

The basic premise here is to generate a computer system for riskassessment which runs through a series of steps to, ultimately, generatea compliance “risk score.” This step-by-step computer-implemented methodis diagramed in some form at FIG. 11. The process starts at 404, thescore is generated at 432 and the computer weighs the risk score againsta particular threshold at 406. A risk ruleset 405 is pre-loaded todetermine the risk score threshold(s) of the relevant data inputs. Ifthe risk score is less than the predetermined threshold, there is noissue and the process exits at 408. Otherwise the process continues onand the system will determine at 410 whether manual action is necessaryto bring the risk score to compliance levels.

If the system determines that manual interaction by an operator or otheragent is necessary to adjust the risk or correct an error (e.g., issuewith compliance or licensure), then the necessary agent is sent anotification for action at 412, after which the automated system exitsat 408. When the system starts again, it will check to determine whetheror not the corrective measures have been taken.

If no manual action is determined to be needed at 410, then the processwill automatically apply a pre-determined or pre-set interventionruleset for the entity at 414. The necessary steps, commands,instructions, or features must be loaded initially and/or updated atlater times via a mitigation and action ruleset 416. This ruleset isdownloaded into the computer system and updated as necessary to ensurethe system has the necessary access, commands, passwords, and otherinformation to perform autonomous steps toward compliance and reductionof risk score.

When applying the intervention ruleset at 414, multiple options areultimately available. Ultimately, a performance entity will either bedetermined as compliant or non-compliant, and upon being deemednon-compliant may be eliminated completely or be placed under acompliance exception. As examples, the system may block all of the newbusiness (NB) accounts at 418; the system may block a portion of the NBaccounts at 420; or the system may recall existing in-work accounts at422. An example of step 420 would occur when the performance entityfails compliance in a particular region (e.g., a state), and thecompliance management system removes all accounts associated with thatperformance entity from that particular region, but all other accountsfrom other regions remain with the performance entity. In such asituation, a compliance exception is applied to the performance entitywherein they are kept in the database, but flagged and prevented frombeing assigned accounts from a region in which they are not incompliance.

The entity is then assigned a disposition status at 424—likely“non-compliant” or otherwise unable to serve the client at this timeuntil the appropriate measures are taken—and any non-compliance isrecorded as compliance exceptions 425 to be used in the subsequentgeneration of any risk score 452. A check is performed at 426 todetermine whether or not the entity has remedied the initial conditionresulting in a need for interaction. If the entity has been unable toresolve the issue or otherwise remove the conflict, the system exits at428 and other steps may be necessary. However, if the entity in questionhas remedied the condition or if the functions of the system haveotherwise resulted in the entity being able to bring the entity'scompliance back in check, the entity's disposition is cleared at 430 anda new compliance score for that entity is generated at 432. Do note thatthe entity may be unable to be selected by the analysis solution 4 orreceive compliance exceptions 425 for certain subsets of work while thatentity's risk score is greater than the predetermined or updatedthreshold requirement at 406 or if they have certain disposition status424.

FIG. 12 goes into greater detail about how the risk score is actuallygenerated using a risk score generation subsystem 452. This subsystem isimplemented through a computer-implemented method of steps starting at454. The compliance risk score must be generated at 456 before it can beweighted against a known or unknown threshold. The compliance risk scoreis generated by checking on various datapoint inputs and determining thelicensure compliance level, work history, and other relevant factors ofthe entity which is being assigned the score.

For example, the compliance risk score generation 456 step takes intoaccount various compliance standards 458 (e.g., regulations), agency andagent statuses 460; various other risk score thresholds and actions 462which may have occurred previously or are pending; account work history464, including history which may pertain to a specific set of accountdata; and compliance requirements 466 input either manually or based ona chosen ruleset 405 which is input at the outset; and the feedback fromauditable event history 472. An illustrative example might be asfollows: where the calculated risk score for a performance entity ishigher than the threshold prescribed (i.e., an undesirable condition).Such a condition might be where a performance entity allows theirlicense to collect to expire in the state of Arizona and the supplyentity has a rule that prohibits this. As a result, an automated actionmight be for the system to recall all accounts assigned to thatperformance entity and to block assignment of any new accounts havingdebtors from Arizona, with such actions to continue until, and for 30days after, the performance entity renews its license in Arizona andprovides proof (e.g., documentation in the form of a copy of theirre-issued Arizona collection license certificate) that compliance hasbeen restored. In this example, all critical data about the entireexception condition would be retained for audit, reporting, and possibleincorporation into future risk score calculations. Again, compliancecould include whether an entity is licensed to operate in a region,whether past violations preclude the entity from operating in thatregion, or various other aspects.

Once the compliance risk score is generated, it is weighted against athreshold at 468. If the risk score is lower than the threshold, thesystem exits at 476 as the entity does not exceed the risk tolerance tothe supply entity at this time. If the risk factor is greater than thethreshold, notifications and actions 470 must occur, as outlined at FIG.11. These actions and notifications may depend upon relevant auditableevent history 472 and compliance exceptions 425 of the entity and/orprescribed mitigation and action ruleset(s) 474 as discussed previously.

The end result is a determination of whether or not a particular entitymay serve the supply entity on a particular account or set of accounts.Compliance standards are automatically tracked using thecomputer-implemented method of steps and vendors or entities arenotified when they may be approaching non-compliance, when they havereached non-compliance, or at any other prescribed time. The supplyentity is also notified and may actually be prevented from assigningjobs or accounts to non-compliant entities by the automated analysissolution 4 system until those entities are once again compliant.

The compliance management system 402 as described herein includes anautomatic shutoff feature capable of automatically shutting downsubmissions of debtor accounts to credit collection agencies whencompliance is not met. The level of shutoff can vary depending onpredetermined threshold levels. As discussed above, compliance may berated on several factors, including whether or not the collection agencyhas a license to practice within a specific State. Other factors mayinclude calling habits (e.g., excessive calling tactics) or similarviolations which the compliance management system 402 can track.

In one example, a collection agency may have a license to collect inState X expire. This threshold will be detected by the compliancemanagement system 402 at 406 based upon the risk ruleset 405 includingsuch a factor as exceeding the threshold. Placement of accounts in StateX to the agency will be automatically shut off. In an instance like thisexample, the agency may only be shut off from debtors located withinState X until the license is renewed. However, in other instances, suchas if the agency is accused of excessive calling of debtors, the entireagency's placement may be suspended for a time period, or placed on“hold.”

If an agency is placed on “hold,” no new debtor accounts will bedistributed to that collection agency for a period of time. The agencymay continue to work on counts already assigned to it. The agency can beremoved from this suspended basis if the client creditor requests it, orif the agency's risk score drops below the threshold.

A third situation, such as the position above where the collectionagency loses its license in State X, would result in a recall of allaffected debtor accounts to be reallocated to other agencies. In such asituation, if the agency has been unable to reinstate its license inState X within a time period, all accounts located in State X will berecalled, placed back into the compliance and allocation enginesdiscussed above, where those accounts will be redistributed to newcollection agencies. Because accounts are placed with the collectionagency best suited to handle those accounts, the recall option is notpreferred, and is avoided if possible.

In order to incorporate the threshold score within the compliancemanagement system 402, data must be recorded from each collectionagency. As discussed, this could include call logs to determine thecalling habits of the agency. Other data collected may includedisclosure letters sent by the agencies, individual collector licenses,or other legal or preferred requirements. Each creditor may establishtheir own threshold requirements based upon their own personalpreferences and interpretations of the law(s).

In a preferred embodiment, this compliance management system 402 wouldrun an audit of each credit collection agency account daily and flagaccounts in violation. As described above and in FIG. 11, the systemwill flag accounts needing manual action, but will automatically applyappropriate shutoff routines to those accounts which do not requiremanual intervention.

It should be noted that violations could be weighted differently, andsome violations may never result in recall despite their combined riskscore vs. the threshold level.

Another concept generally associated with the compliance managementsystem 402 as well as the debt collection enhancement system 302,including the allocation process 353, is the concept of thresholding.This concept can be incorporated at any step taken by the systems, butmay be most appropriate during the allocation process 353.

For example, the allocation of debtor accounts to credit collectionagencies is ideally based upon the factors described herein, and thosecollection agencies who are the best performers against a specific typeof debt based upon external factors (e.g., geography) would be assignedthat debt. However, in the real world, collection agencies have not beenoperating on such a model, and therefore presently operate on differentscales. Therefore, the number of collection agents an agency has onstaff is a value that must be considered.

In an instance where Agency A performs better on a specific type ofaccount than Agency B, but Agency B has twice the staff allotted forworking on that type of account, Agency B will necessarily be given atleast some of those accounts because Agency A cannot meet the real worlddemand. However, the model suggests that Agency A be pushed to hireadditional credit agents for collecting that specific type of accountover time, thereby taking accounts away from Agency B.

The score of each agency must be tracked over time as collection agentshave a high turnover, and as agencies hire additional agents, theirscores may change. Therefore it is not desirable to quickly adjust thesize of Agency A to meet the demand in the example above, as that couldcause Agency B to out-perform Agency A due to the new hires. Theadjustment should be gradual and measured carefully. A ResourceAllocation Threshold limits the volume change of an agency based uponthe thresholding performance. In most instances, the creditor will tellthe system how fast the threshold can move (e.g., 1% change per month).

Variance also comes into play in these scenarios. In the example above,if the score of Agency A and Agency B differs by a small amount (e.g.,0.1%), then there would not be an immediate desire to push accounts fromAgency A to Agency B; however, because multiple variable types are takeninto consideration, the system will drill down further into the data tomake sure that special subsets of those accounts are going to the betteragency. An example of this may be a certain nationality located within acertain geographic area.

Generally, the present invention provides an automated system, throughthe use of hardware, software, or some combination thereof. The systemidentifies problems and either corrects those problems, eliminates theproblems or problematic entities (e.g., performance entities exceeding arisk score threshold), or calls upon manual intervention to correctproblems.

It is to be understood that while certain embodiments and/or aspects ofthe invention have been shown and described, the invention is notlimited thereto and encompasses various other embodiments and aspects.The preferred and alternative embodiments outlined herein are examplesof two ways to practice the present invention, but are not intended tolimit the practice of the present invention in any way.

Having thus described the invention, what is claimed as new and desiredto be secured by Letters Patent is:
 1. One or more non-transitorycomputer-readable media storing computer-executable instructions that,when executed by a processor, perform a method of allocating debtcollection accounts among collection parties, the method comprising thesteps of: receiving an input data file including a plurality of debtcollection accounts, each debt collection account of the plurality ofdebt collection accounts having a plurality of account traits;determining, for each collection party of a plurality of collectionparties, a plurality of performance traits for the collection party; foreach debt collection account of the plurality of debt collectionaccounts, allocating the debt collection account to a collection partyof the plurality of collection parties, based at least in part on theaccount traits of the debt collection account and the performance traitsof the collection party; based on the step of allocating, generating anoutput data file including the allocation of debt collection accountsamong collection parties; receiving a compliance data file for eachcollection party of the plurality of collection parties, the compliancedata file assessing compliance by the collection party with a pluralityof compliance standards; based on the compliance data for eachcollection party of the plurality of collection parties and a riskruleset, generating a risk score for each collection party of theplurality of collection parties, the risk score representing alikelihood of compliance violations; for each collection party of theplurality of collection parties, if the risk score for the collectionparty exceeds a predetermined threshold, generating a reallocation datafile reallocating at least one debt collection account allocated to thecollecting party based on an intervention ruleset, the interventionruleset including a plurality of rules for reducing risk score;reallocating at least one debt collection account based on thereallocation data file.